The Trump administration is set to ease some of the tariff burden it has introduced for the automotive industry this year.
A 25% duty was introduced on cars and components earlier this year, independent of the ‘reciprocal’ tariffs introduced in early April.
However, the White House has struck a deal with the automotive industry, which typically relies on international supply chains for the sourcing of parts.
Under the arrangement, “car companies paying tariffs will not be charged other levies, such as those on steel and aluminium, and that reimbursements would be given for such tariffs that were already paid”, Reuters reports.
‘Major victory’
The easement should reduce the cost for auto firms importing parts to manufacture cars in the US.
US commerce secretary Howard Lutnick said, in a White House statement:
"This deal is a major victory for the president's trade policy by rewarding companies who manufacture domestically, while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing.”
General Motors’ chief executive Mary Barra has welcomed the easement, telling the BBC:
"We're grateful to president Trump for his support of the US automotive industry and the millions of Americans who depend on us."
The plan is expected to be confirmed by the White House today, with president Trump due to speak at a rally in Michigan to mark his first 100 days back in the Oval Office.
‘Higher auto prices’
The easement comes shortly after the US automotive industry wrote to the Trump administration to warn that hiked tariffs would lead to “higher auto prices” for consumers.
“Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships and will make servicing and repairing vehicles both more expensive and less predictable,” the industry said in the letter, reported by the Guardian.
Following the introduction of the tariffs, the Chartered Institute of Export & International Trade’s senior trade legislation adviser, Garima Srivastava, warned that UK exporters would also be affected.
“The impact is wide-reaching, as the US is one of the UK’s biggest export destinations for vehicles and auto components,” she said, when responding to some of the Chartered Institute’s members’ frequently asked questions.
“A 25% tariff on cars could make UK-made vehicles significantly less competitive compared to US-made alternatives, or vehicles from those countries which can leverage a tariff-free framework under a trade arrangement.”
Chartered Institute members can read more of Srivastava’s advice for navigating hiked auto tariffs here.
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